It's easy to spend millions of dollars on a commercial lease. Whether you're looking at a five-year commitment on a 300,000 square foot warehouse or a ten-year deal on 10,000 square feet of office space, it's easy to find yourself on the hook for millions of dollars even in lower cost markets. In major markets like New York and San Francisco, eight digit leases aren't that uncommon. With that in mind, finding at least a million dollars in savings isn't hard to do. Read on.
Get Some Help
Going into a commercial lease negotiation -- even a "simple renewal" -- by yourself is a lot like doing your own dental work even though you have insurance that will pay for it. You can do it, but it will be painful and messy, and you'll end up spending a lot more money paying someone to fix it later.
Having a tenant representative on your side won't cost you anything since the landlord's representative covers his or her costs out of the total fee. What that representative brings is market knowledge, negotiating skill and a credible way to let the person on the other side know that you aren't going to be pushed around.
Become an Expert
You can't tell if you are getting a good commercial lease deal if you aren't an expert in the market as a whole. Before starting to negotiate your next occupancy agreement, study the market as much as possible. Here are some examples of how you can prepare yourself for your next negotiation:
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Know about every space -- whether or not it is a perfect fit for your needs.
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Have a keen understanding of what landlords are asking for and, more importantly, what they are actually taking.
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Study the underlying communities to see if there are demographic shifts or structural changes that could impact their desirability now or later.
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Become an expert on the construction pipeline and on what will be coming on market so that you can consider actually occupying them or just using them as a threat in your negotiations.
Working with a tenant representative simplifies this process. They have the expertise you need and can serve as a filter to ensure that you only look at the limited number of spaces that will fill your needs.
No "Renewal" Is Simple
Even if you plan to stay in your existing space, don't make the mistake of thinking that renewing your space is simple, even if you plan to take your option. After all, are you sure that your commercial lease renewal option is the best possible deal? If your landlord is excited to get you to sign, it could be that the market has changed and better deals are available. When you renew without an option, it is really no different from a new lease since everything is negotiable.
Take Your Time
There is nothing that your landlord would like better than for you to call him or her up seven months before your lease expires and let him or her know that you would like to renew and take your option. It isn't that he or she wants to keep you. It's that you don't have any time to look at other options -- and you will end up desperate. It takes a few months to find a commercial lease space, a couple of months to negotiate the lease, and anywhere from a couple of months to a year to build it out. If you don't start early, you won't have the luxury of walking away and negotiating with someone new.
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